Women Worrying About Retirement
Many women have a legitimate fear of being impoverished in their old age. After all, compared with men, women tend to earn less, live longer and have fewer pension benefits. Today’s companies might be able to help alleviate some of their fears through better retirement planning and education programs.
The U.S. labor force is getting older, sharpening the interest many employees have in retirement issues. The Bureau of Labor Statistics (BLS) projects that the number of workers aged 55 and older will have grown by nearly 50% between 2002 and 2012, increasing their representation in the labor force from 14% to more than 19% (2004). The BLS also predicts that female workers in that age group will number 12 million by 2012.
Poverty is a real possibility. Social Security Administration data from 2002 reported by Boston College’s Center for Retirement Research (CRR) labeled 28% of single women aged 65 and older as “poor” or “near poor,” compared with 23% of men (Munnell, 2004). Many women are concerned about their financial futures. Prudential Financial’s most recent annual research found that 78% of more than 1,100 female respondents said that maintaining their lifestyle during retirement was “very important,” but only 12% were “very confident” that they could do so (Prudential Financial, 2004).
Lower earnings are a contributing factor. For a variety of reasons, women’s earnings are about 75% of men’s, and when adjusted over the span of a career, the figure is more like 44% (Bernstein, 2004; Institute for Women’s Policy Research, 2004). Women also work fewer years overall because they tend to take more time away from the workplace to care for families – a total of about 11 years – whereas men average only about 16 months away from their careers to help family members (Eisinberg, 2004). Differences in longevity have financial consequences, too. Life expectancies for women exceed those for men by more than five years, challenging women to fund potentially longer retirements (“Life,” 2004).
Funds for women’s retirement are less likely to come from pensions. Labor Department data going back to 1996 shows that only about a third of retired women had defined benefit pensions, while 55% of men did. Moreover, average benefits for women were about half those that men received (Aschkenasy, 2005). More recent studies show a third of retired men and just 13% of retired women with private pensions. And among current workers, 49% of men have some type of pension plan, compared with 22% of women (Rich, 2004). Obviously, women without pension plans often find themselves relying heavily on Social Security benefits for their retirement income.
Despite these disturbing trends, the news isn’t all bad. Women today – especially those of the baby boom generation – have a growing awareness of retirement issues, and they’re involving themselves more in retirement planning and financial decision-making. Also, thanks to the growing popularity of 401(k) defined contribution plans in preference to defined benefit plans, “[M]ore women are likely to end up with more benefits and their benefits are likely to be larger,” according to the CRR.
The 401(k) accumulation advantage has a downside, though. That is, the benefits must extend over women’s longer life spans. “Should they wish to annuitize a portion of their 401(k) accumulations at retirement, they will find that insurance companies compensate by providing smaller benefits to women, and larger benefits to men,” reports the CRR (“401[k],” 2005).
Education and planning are two areas in which businesses can provide practical help. Since 2000, financial firm J.P. Morgan has offered its clients a “Women and Investing” program. The company estimates that about 10% of its clients have used the educational offering, generating an average 5% increase in 401(k) participation by female employees (Hawthorne, 2005).
Financial planning firms also offer independent workshops and seminars on retirement planning. Prudential, for instance, provides educational programming for employees, covering topics like retirement income, assets, annuities, and portfolio composition (Toland, 2004). Of course, companies can also choose to craft their own educational programming in-house.
Further, if women wish to step away from and later reenter careers in order to manage family responsibilities, then companies can help them with that transition planning. This can include educating women about the potential effects of career timeouts on retirement income.
Perhaps some combination of individual employee efforts and employer initiatives today can help women avoid a future in which they must work into old age – not because they want to, but because they simply cannot afford to retire.
For a PDF version of Prudential Financial’s 2004-2005 Study on the Financial Experience and Behaviors Among Women, click here.
For a PDF version of Alicia Munnell’s article “Why Are So Many Older Women Poor?” from Boston College’s Center for Retirement Research, click here.
Documents used in the preparation of this TrendWatcher include:
“401(k) Plans and Women: A ‘Good News/Bad News’ Story.” 401(k) Advisor. ProQuest. April 2005, p. 11.
Aschkenasy, Janet. “The Bag Lady Bugaboo: Planners Can Help Women Address the Real Fears of Poverty in Old Age.” Financial Planning. ProQuest. March 1, 2005, p. 1.
Bernstein, Aaron. “Women’s Pay: Why the Gap Remains a Chasm.” BusinessWeek, June 14, 2004, pp. 58-59.
Eisinberg, Lee C. “The Retirement Gender Gap.” Agency Sales. ProQuest. August 2004, p. 27.
Hawthorne, Fran. “Engendering Savings.” Institutional Investor. ProQuest. April 2005, p. 1.
Institute for Women’s Policy Research. “Women’s Earnings Fall; U.S. Census Bureau Finds Rising Gender Wage Gap.” Press release [www.iwpr.org]. August 27, 2004.
“Life Expectancy Continues to Increase, Men Gaining on Women.” Senior Journal [www.seniorjournal.com]. November 29, 2004.
Munnell, Alicia H. “Why Are So Many Older Women Poor?” Just the Facts on Retirement Issues. Center for Retirement Research at Boston College. April 2004.
Prudential Financial. 2004-2005 Study on the Financial Experience and Behaviors Among Women. Newark, NJ: Prudential Financial, 2004.
Rich, Sharon. “Retiring Women: A Real Anxiety.” On Wall Street. ProQuest. August 1, 2004, p. 1.
Toland, Tamiko. “More Women Seek Retirement Plans.” Bank Investment Consultant. ProQuest. December 1, 2004, p. 6.
U.S. Department of Labor, Bureau of Labor Statistics. “BLS Releases 2002-12 Employment Projections.” Press release [www.bls.gov/emp]. February 11, 2004.
U.S. Department of Labor, Bureau of Labor Statistics. “Labor Force.” Occupational Outlook Quarterly [www.bls.gov]. Winter 2003-2004, pp. 42-46.
The U.S. labor force is getting older, sharpening the interest many employees have in retirement issues. The Bureau of Labor Statistics (BLS) projects that the number of workers aged 55 and older will have grown by nearly 50% between 2002 and 2012, increasing their representation in the labor force from 14% to more than 19% (2004). The BLS also predicts that female workers in that age group will number 12 million by 2012.
Poverty is a real possibility. Social Security Administration data from 2002 reported by Boston College’s Center for Retirement Research (CRR) labeled 28% of single women aged 65 and older as “poor” or “near poor,” compared with 23% of men (Munnell, 2004). Many women are concerned about their financial futures. Prudential Financial’s most recent annual research found that 78% of more than 1,100 female respondents said that maintaining their lifestyle during retirement was “very important,” but only 12% were “very confident” that they could do so (Prudential Financial, 2004).
Lower earnings are a contributing factor. For a variety of reasons, women’s earnings are about 75% of men’s, and when adjusted over the span of a career, the figure is more like 44% (Bernstein, 2004; Institute for Women’s Policy Research, 2004). Women also work fewer years overall because they tend to take more time away from the workplace to care for families – a total of about 11 years – whereas men average only about 16 months away from their careers to help family members (Eisinberg, 2004). Differences in longevity have financial consequences, too. Life expectancies for women exceed those for men by more than five years, challenging women to fund potentially longer retirements (“Life,” 2004).
Funds for women’s retirement are less likely to come from pensions. Labor Department data going back to 1996 shows that only about a third of retired women had defined benefit pensions, while 55% of men did. Moreover, average benefits for women were about half those that men received (Aschkenasy, 2005). More recent studies show a third of retired men and just 13% of retired women with private pensions. And among current workers, 49% of men have some type of pension plan, compared with 22% of women (Rich, 2004). Obviously, women without pension plans often find themselves relying heavily on Social Security benefits for their retirement income.
Despite these disturbing trends, the news isn’t all bad. Women today – especially those of the baby boom generation – have a growing awareness of retirement issues, and they’re involving themselves more in retirement planning and financial decision-making. Also, thanks to the growing popularity of 401(k) defined contribution plans in preference to defined benefit plans, “[M]ore women are likely to end up with more benefits and their benefits are likely to be larger,” according to the CRR.
The 401(k) accumulation advantage has a downside, though. That is, the benefits must extend over women’s longer life spans. “Should they wish to annuitize a portion of their 401(k) accumulations at retirement, they will find that insurance companies compensate by providing smaller benefits to women, and larger benefits to men,” reports the CRR (“401[k],” 2005).
Education and planning are two areas in which businesses can provide practical help. Since 2000, financial firm J.P. Morgan has offered its clients a “Women and Investing” program. The company estimates that about 10% of its clients have used the educational offering, generating an average 5% increase in 401(k) participation by female employees (Hawthorne, 2005).
Financial planning firms also offer independent workshops and seminars on retirement planning. Prudential, for instance, provides educational programming for employees, covering topics like retirement income, assets, annuities, and portfolio composition (Toland, 2004). Of course, companies can also choose to craft their own educational programming in-house.
Further, if women wish to step away from and later reenter careers in order to manage family responsibilities, then companies can help them with that transition planning. This can include educating women about the potential effects of career timeouts on retirement income.
Perhaps some combination of individual employee efforts and employer initiatives today can help women avoid a future in which they must work into old age – not because they want to, but because they simply cannot afford to retire.
For a PDF version of Prudential Financial’s 2004-2005 Study on the Financial Experience and Behaviors Among Women, click here.
For a PDF version of Alicia Munnell’s article “Why Are So Many Older Women Poor?” from Boston College’s Center for Retirement Research, click here.
Documents used in the preparation of this TrendWatcher include:
“401(k) Plans and Women: A ‘Good News/Bad News’ Story.” 401(k) Advisor. ProQuest. April 2005, p. 11.
Aschkenasy, Janet. “The Bag Lady Bugaboo: Planners Can Help Women Address the Real Fears of Poverty in Old Age.” Financial Planning. ProQuest. March 1, 2005, p. 1.
Bernstein, Aaron. “Women’s Pay: Why the Gap Remains a Chasm.” BusinessWeek, June 14, 2004, pp. 58-59.
Eisinberg, Lee C. “The Retirement Gender Gap.” Agency Sales. ProQuest. August 2004, p. 27.
Hawthorne, Fran. “Engendering Savings.” Institutional Investor. ProQuest. April 2005, p. 1.
Institute for Women’s Policy Research. “Women’s Earnings Fall; U.S. Census Bureau Finds Rising Gender Wage Gap.” Press release [www.iwpr.org]. August 27, 2004.
“Life Expectancy Continues to Increase, Men Gaining on Women.” Senior Journal [www.seniorjournal.com]. November 29, 2004.
Munnell, Alicia H. “Why Are So Many Older Women Poor?” Just the Facts on Retirement Issues. Center for Retirement Research at Boston College. April 2004.
Prudential Financial. 2004-2005 Study on the Financial Experience and Behaviors Among Women. Newark, NJ: Prudential Financial, 2004.
Rich, Sharon. “Retiring Women: A Real Anxiety.” On Wall Street. ProQuest. August 1, 2004, p. 1.
Toland, Tamiko. “More Women Seek Retirement Plans.” Bank Investment Consultant. ProQuest. December 1, 2004, p. 6.
U.S. Department of Labor, Bureau of Labor Statistics. “BLS Releases 2002-12 Employment Projections.” Press release [www.bls.gov/emp]. February 11, 2004.
U.S. Department of Labor, Bureau of Labor Statistics. “Labor Force.” Occupational Outlook Quarterly [www.bls.gov]. Winter 2003-2004, pp. 42-46.
Carol Morrison is a Senior Research Analyst and Associate Editor with the Institute for Corporate Productivity (i4cp), specializing in workforce well-being research.